Ask Paul: We gave our sons cash to buy homes, how can we protect it from divorce?
We gifted our two sons money to buy their homes (we scrimped, sacrificed and saved to help them out - it's their inheritance).
How do they/we protect their assets if/when they become partnered, considering the high number of relationships that break down? - Mel
Excellent question, Mel. This is a challenge for all parents trying to support their kids.
I am not a lawyer but have discussed this issue with a number of expert legal people. The advice I have received over the years has been quite consistent.
Naturally, you should seek your own legal advice from your solicitor, but the key themes are to document the money you provide as a loan.
This requires an agreement, best done by a solicitor. This should contain the terms of the loan and repayment conditions. A loan would generally require regular repayments - this could be modest, but again your solicitor can advise you.
Another step is a second mortgage against the property they buy, as I assume they would need a first mortgage from a lender. This can be tricky as lenders are likely to want the money from you to be a gift, so again your solicitor will provide your best advice.
Some parents go with this full "belt and braces" approach, ensuring that the money is clearly a loan; others go with a middle approach with just a written agreement; some simply provide the money as a gift and see how things pan out, which is, of course, a risk in the situation you mention of a relationship breakdown
The path you choose is up to you, but to sensibly move to documentation, understand how a second mortgage may work and how this may or may not fit with a bank loan, a solicitor is really important.
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